illustration for the drivers of inequality

Driver Category 4.6

Skewed remuneration structures and the lack of regulation of high pay

This driver covers aspects related to remuneration and high pay. This extends from the structures that determine remuneration and skew rewards between, for example, managerial and operational occupations.

It also includes the existence of regulation and controls of executive pay setting and excessive use of bonuses (eg. in the financial sector), as well as the increasing use of share-based incentive systems, golden handshakes, severance packages, unearned income perks and their regulation and taxation.

Guiding Questions

General questions

  • How do CEOs and top managers’ pay (and increases in pay) compare to junior and low-paid employees in same companies?
  • How is top pay evolving and is there evidence available of increasing concentration of rewards at the top?
  • How do trends in high pay compare to trends in productivity and profitability of large companies?
  • What has been the evolution of high pay in privatised utility companies and in private companies responsible for delivering large government contracts?
  • Does the government use its power as purchaser to demand executive pay restraint?
  • Does your country have a permanent body to monitor top pay trends?
  • Does it have adequate access to data on pay (from company reports and anonymised data from the tax authority for example)? Does this body report annually to government and the public on high pay?

Wage setting systems, executive pay packages and disclosure

  • What are the systems for wage setting in the companies with the highest levels of executive pay?
  • What is the composition of committees/bodies that set pay in large companies?
  • Are executives setting wages amongst themselves?
  • Is there any broader employee representation in wage setting committees?
  • Is employee representation mandatory under government regulation or voluntary?
  • If employees are part of remuneration committees, do they receive the appropriate training and support?
  • Are shareholders involved in reviewing executive pay packages (whether pay increases or severance packages)?
  • If so, how often do shareholders reject proposed pay/severance packages?
  • Is analysis available on the make-up of executive pay packages?
  • Do top executives in the largest companies in your country generally receive share option schemes?
  • Are increases in executive pay linked to performance?
  • How does the base salary compare to the value of bonuses and stock options?
  • Is the full value of the remuneration package (not just the salary) typically taken into account when calculating pay ratios and in any pay disclosure documents?
  • What is the situation with regard to remuneration in the financial sector?
  • Have there been any actions taken to curb excessive remuneration and bonuses in the financial sector?
  • What are the disclosure rules related to top pay in your country?
  • Has the government mandated that publicly listed companies must publish any pay information (e.g. the ratio of the pay of their CEO to their median employee or information on the executive team pay packages)?

High pay policy reforms and the corporate lobby

  • What reforms are on the agenda to tackle high pay?
  • Have there been any proposals related to limiting top earnings – such as through the application of maximum pay multiples or limits to the use of share options in pay packages?
  • Have there been any proposals to charge higher corporate tax rates for firms with higher ratios of CEO-to-worker compensation, or to increase the marginal tax rate for high earners?
  • Is there evidence that large company owners and wealthy individuals lobby the government about high pay, and related taxation issues, and exert influence on policy decisions?
  • What response have large companies had to any new regulations/reforms being discussed or put in place?
  • Are companies lobbying the government or undertaking legal challenges to overturn new legislation?
  • Is there evidence of companies lobbying against tax changes aimed at tackling high pay?
  • Is information transparently available on any lobbying activities, and donations from large companies to political parties?

Indicators

Potential indicators to monitor the drivers of inequalities in this main driver category

  • % of largest companies with employee representation on remuneration committees
  • % of average executive pay coming from stock options and bonuses
  • Amount spent by largest companies annually on stock buybacks
  • Average pay ratio of largest companies (CEO : median employee)
  • Number of shareholder resolutions annually related to excessive CEO pay
  • Number of large organisations annually publishing information on pay differentials

Candidate Policies

To see related Candidate Policies in this main driver category please click here.